Rising costs & labor challenges impeding Canadian construction activity

• 95% of Canadian respondents single out material costs to be impeding construction activity
  
• Workloads are expected to rise for year ahead, but mainly driven by infrastructural projects
  
• Construction and material costs set to impact future workloads
  

There is continued growth in activity across Canadian construction markets despite rising concerns over the cost and availability of materials to complete the projects, according to the latest RICS Global Construction Monitor for Q1 2022.

In terms of current workloads at a region wide level, the net balance of respondents seeing an increase in activity compared to the preceding quarter stands at +48%. Looking forward over the next twelve months, a net balance of +67% expect infrastructure workloads to continue to increase and while there is more positivity about the other segments of the construction industry at this time horizon, infrastructure projects will lead activity; private non-residential has a reading of +53% while for private residential, it is +59%.

However, despite the strength in current workloads the impact of global supply chain shortages is impeding activity across Canada. Material costs are currently the biggest impediment to growth with +95% respondents to the survey reporting that elevated material costs are currently impacting market activity. Aside from costs, the availability of materials, and access to is a significant challenge, highlighted by 79% of respondents.

Labor shortages and access to the right skills doesn’t seem to be improving. In Canada, 75% of respondents are struggling to find the right skilled labor, while access to trades, like electricians and carpenters are also hard to come by.

Despite the current challenges, respondents still remain optimistic for the coming year ahead as workloads are anticipated to rise. However, there is concern over the impact of future cost increases and inflation continues to raise the pricing of tender and construction costs. However, the current infrastructure projects and pipeline is set to sustain the Canadian construction sector as +67% Canadian contributors anticipate a rise in workloads for the year ahead. 

Canadian Institute of Quantity Surveyor’s CEO, Sheila Lennon, CAE, commented: “I was pleased to see that despite an increase in material costs, labor shortages, rising interest rates, and the war in Ukraine, there was an overall positive outlook amongst those surveyed.  This falls in line with the Labor Force Survey (LFS) report which shows that in March 2022, there was a 4.8% positive change in the employment rate from March 2021 to March 2022 in the construction industry.  With employment gains largely in the construction and natural resources industries, and a significant workload increase in private residential, private non-residential and infrastructure sectors as reported in this survey, the forecast seems bright for our industry in 2022.”

RICS Chief Economist, Simon Rubinsohn, commented: “The good news in the latest report is that the industry remains positive about the outlook for activity and that the generally upbeat mood can be seen not just in regard of infrastructure and housing development but also in the commercial sector. However, it is clear that the sector faces significant challenges which have been reflected in recent official data showing a sharp rise in vacancies across the construction industry. RICS numbers demonstrate these shortages are pretty much across the board including quantity surveyors and project managers as well as both skilled trades and more general labour. This, combined with problems around accessing building materials in the current environment, is exerting significant upward pressure on construction costs at the present time.”

-ENDS-

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